Microfinance shouldn't do the government's job

It is a requirement of civil society that government obviate the need for payday lenders, writes Carl Packman.

There has been a recent interest in microfinance as a means to draw vulnerable people away from the scourge of payday lending – an industry which saw its inevitable growth over the Christmas period, with the number of enquiries about it at the Citizens Advice Bureau doubling from last year. 

The Financial Times recently ran an article headlined Microfinancier gives payday lenders run for money. Reporter Sarah O'Conner discusses to what extent this type of financial product offers a fairer deal for borrowing money, with more manageable prices attached to loans: £162 on a 52-week loan of £600 compares well with the £25-30 per month you can expect to pay for a loan of £100 with the average high cost credit seller. 

Although relatively rare in the UK, the microfinance movement is over 40 years old. It all began in the early 1970s in Bangladesh and Latin America and since then has seen small but effective support around the world. 

I spoke to Saloman Raydan Rivas, a microfinance expert, about Professor Mohammed Yunnus, the don of the microfinance movement. Rivas told me Yunnus wanted to develop a banking model which did not take advantage of the poor, but he was unsure of how to tap into existing local lending mechanisms, such as self-financed communities, to bring about change on a wider scale. 

Today there are many people trying to realise his dream, and Fair Finance, the case studied in the Financial Times' article, is one. In fact Faisal Rahman, the company’s director, is strongly influenced by the microfinance movement, and hopes to bring it to market in the UK.

But there is something rather rocky about relying on private equity funding, as Fair Finance does (a fact not discussed in the Financial Times article) that makes me worry, both in practice and on first principles. 

Fair Finance was declined investment money by Barclays and the Royal Bank of Scotland when it first started out, and they even had problems with Santander, which would not put up investment alone. When I asked Rahman about it, he admitted it was a setback, and one could argue this is hardly a surprise. Rahman wants funding from investors to sell loans ethically to people, charging low interest, and risking low returns, all to realise a dream of creating a banking model that undercuts usurers and rip-off merchants. 

For all the good he wants, many investors clearly see the words “low return” and run a mile. In short, we cannot rely on the good nature of profit-making big banks to finance ethical, non-profit, lending schemes. But should we expect any private business to do this? Since it is in the interest of the public purse to keep individuals' personal debt profiles down, should ethical lending not be a standard expectation of the government? 

It is surely a requirement of a civil society that the government allocate enough money – for instance, through a credit union – to ensure consumers aren't left with going to payday lenders as their only option.

Having said that, I understand Rahman’s motives. Recently it was reported that a loans company who target personnel in the armed forces with high cost credit at 3,300 per cent interest was sold advertising space in Defence Focus, the magazine of the Ministry of Defence. Is this perhaps a sign of how relaxed public bodies have become about payday lending?

High cost loans for the armed forces has become a big issue. A representative of Waterhouse Baker, who offer financial advice to any serving member of the forces, told me that payday loans is often a short-lived solution, “as many default as the monthly expenditure is too high for the income gained”. 

Problems like these need solving fast, because the problem of high personal debt is one which affects the whole economy and the whole society. For me, the buck stops with the government.

Given the enormity of the problem of debt, government should be in charge of reversing it. So while the aims of Fair Finance and other similar organisations are positive, pricing out payday lenders should be chiefly the preserve, not of microfinance, but of the state as part of its commitment to maintaining a civil society.

Photograph: Getty Images

Carl Packman is a writer, researcher and blogger. He is the author of the forthcoming book Loan Sharks to be released by Searching Finance. He has previously published in the Guardian, Tribune Magazine, The Philosopher's Magazine and the International Journal for Žižek Studies.

Photo: Getty Images
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The hidden crisis in the National Health Service

Hospitals are no longer safe places for their staff, warns Simon Danczuk.

It feels as though not a week can pass without the media warning of a fresh “crisis in the NHS”.

But while funding shortages and the impending junior doctor strike are rightly cause for concern, another major crisis is going largely unnoticed.

Figures show that 43 per cent of A&E staff have been physically assaulted at work. Every eight minutes there is some sort of violent incident in a UK hospital.

This is unacceptable, but unfortunately cases of violence against NHS workers seem to be on the increase while the government turns a blind eye to this problem of its own making.

Plotting a graph would show a startling correlation between insufficient NHS funding and the number of doctors and nurses being attacked. As NHS budgets reach breaking point, so too do many patients.

The issue, which will be highlighted in the documentary A&E: When Patients Attack, which airs tonight on Channel 5 at 10pm, is a national scandal.

Health experts suggest that the problem can be directly linked to longer waiting times and staff cutbacks, leading to growing frustration and tension in A&E and other departments. With winter fast approaching, and the notoriously busy festive season to come, incidents of violence look set to get worse. Nobody, least of all our overworked NHS doctors and nurses, should face the prospect of going to work to be attacked, spat at or insulted.

Based at the Queen Elizabeth in Birmingham, one of the country’s biggest hospitals, When Patients Attack follows a security team which uses uniformed guards and a bank of CCTV monitors to keep hospital staff safe.

The sight of a uniformed private security team in an NHS hospital is visually jarring, it would look more at home in a high-security prison than in a place of care and compassion. But the sad reality is, guards like this are a necessary part of the NHS under a Tory Government.

A&E centres across the UK, including the one in Rochdale, are being closed or consolidated creating extra journey times for patients and more pressure on those that remain.

But there is a gaping logical flaw here. NHS trusts are spending money, which should be on patient care, on employing security staff to deal with the fallout from cuts in care.

Seeing the level of physical, verbal and racial abuse that doctors and nurses have to endure makes When Patients Attack hard to watch at times. What is clear is that many of the patients featured are not lashing out for some malicious reason, they are vulnerable and bewildered people in need of care.

Many have learning difficulties or mental health problems, others are disorientated or in pain, there are those under the influence of drink or drugs and some just have nowhere else to go. A significant amount on the security team’s time seems to be spent convincing patients who have been discharged to leave the premises.

Here we see a less obvious example of how Conservative cuts are impacting on our NHS. Hospitals are always open and always welcoming. The duty of care means that no one is turned away. As a result, they are filling the void left by homelessness shelters and local government social services.

David Cameron has made much of the Government’s plan to put mental and physical health on an “equal footing”. But this will remain little more than empty rhetoric as long as those suffering from serious and complex mental health issues continue to seek help at A&E because of a lack of any alternative.

It is not just cuts to councils and the health service that have created this epidemic of NHS violence. In my constituency of Rochdale alone, Greater Manchester Police has been forced to withdraw 150 officers from the beat because of budget cuts. Business owners and members of the public have told me that Police response times have increased dramatically since 2010. It is important that violent incidents are diffused as quickly as possible and while an in-house security team is helpful, the additional support of trained Police officers is vital. Each additional minute that NHS staff have to wait for the Police increases the risk that a situation will escalate and become more serious.

Jeremy Hunt speaks of a seven-day-a-week NHS. But these grand plans ring hollow when we see the reality on the ground in the NHS today. This government cannot even guarantee that staff can work without the fear of physical harm. Our doctors and nurses are among the hardest working people in any community. The very least they can expect is to be able to care for us in a comfortable, supportive, and above all safe, environment.


Simon Danczuk is Labour MP for Rochdale